Ask The Lawyer, Independent Worker or Employee?

SETTING OWN HOURS UNLIKELY TO CONVERT WORKER INTO INDEPENDENT CONTRACTOR

QUESTION: I’ve been working remotely from home since March 13, when the Covid pandemic shut everything down. Because my daughter’s school was also closed, I worked a flexible schedule, putting in 8 hours a day around her schedule. The office has re-opened, but I would like to continue to work from home: I love the extra time I get by avoiding the commute and like the fact that I will be available if my daughter’s school (now open for in-person classes) shuts down once again. My boss tells me I can keep working remotely on my own schedule, but says I will be classified as an independent contractor instead of an employee – and the company will not pay its share of social security, or any benefits, and I will not have any time off. I’m still doing exactly the same work, and am available via phone or zoom whenever needed – can he do that?

ANSWER: The definition of “independent contractor” has been contentious for over 80 years, but has become increasingly important with the rise of the gig economy and the ability of many – like you — to work remotely.

As you note, employers do not have to pay social security or provide independent contractors the same benefits provided to employees – including health insurance, contributions to retirement plans, paid time off, or even paid holidays. On top of that, employers working with independent contractors do not need to meet the requirements of the Fair Labor Standards Act and other laws: They are not required to pay a minimum wage, overtime, unemployment insurance, or worker’s compensation insurance.

For individuals who are truly “independent contractors,” running their own business, such protections and benefits are not expected. For workers who are economically dependent on one business (one job), the lack of FLSA and other protections is extremely important.

When deciding who is an independent contractor, courts often turn to the rules and administrative interpretations put forward by the Department of Labor – and those rules may be about to change. On Sept. 25, the Department of Labor published a proposed new administrative rule on independent contractors that would make it easier for employers to classify workers as contractors instead of employees. At a time when increasing numbers of workers worldwide are working from home in order to avoid contact with COVID-19, the Trump administration has advanced a rule that could open the possibility that such workers – like you — would be classified as independent contractors.

Under the proposed rule, the determination of workers’ status as independent contractor or employee would be primarily determined by “the nature and degree of the individual’s control over the work” and the workers’ “opportunity for profit or loss.” Additional factors which could be considered under the proposed rule are the amount of skill required, the permanence of the working relationship and “whether the work is part of an integrated unit of production.”

After a 30-day comment period (which expires Oct. 26), the rule will become final.

While employees working remotely from home may not have control over their opportunity for profit or loss, many do decide when to work, where to work, and how best to accomplish their work – facts that could lead them to be classified as independent contractors.

The proposed rule restores the primacy of the control factor in determining workers’ role: Was the workers’ schedule set by the business? Did the business control the manner and location in which the work was performed? Did workers have to abide by workplace rules of the business? Are workers able to choose assignments? Do they work with little or no supervision? Are they able to work for others? Under a now-rejected administrative interpretation issued by the Obama administration in 2015, control was one of six factors that had to be examined and analyzed in relation to one another, with “no single factor … determinative.”

The Obama administration’s guidance was issued in response to clear abuses of the FLSA’s exemption for independent contractors. For example, some employers classified workers — who did the same work, in the same place and under the same conditions as its employees — as independent contractors, by hiring them to work for a short period of time and then repeatedly extending their contracts.

It is unclear whether the proposed rule would stop abuses of this kind. The purpose of the proposed rule is to “provide clarity,” reduce litigation costs for employers and make it easier for employers to classify workers as independent contractors, so that they can avoid some fixed employment costs, and create a “more efficient and dynamic work force, where workers are able to more easily move to locations or to employers where their labor and skills are needed.”

What is also unclear is whether the proposed rule, if it is adopted, would survive a change in the majority in the Senate. Congress may undo a rule under the Congressional Review Act. A Democratic Senate might not only vote to undo the rule, but also take up a bill passed last February by the House of Representatives. That bill, which has not been addressed by the Republican-controlled the Senate, would have made it more difficult for employers to classify workers as independent contractors.

Even if the rule is adopted and then retained by the next Congress, there is no guarantee that the Courts will follow the new rule.

The sad fact is that with the definition in such a state of flux, all we can say is that you are most likely not an independent contractor – but this is a determination best made by an attorney after consideration of all the facts related to your work.

The lawyers at GWINN LEGAL PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinnlegal.com.

Information provided on “Ask the Lawyer” is current as of the date of publication. Laws and their interpretation are subject to change. The material provided through “Ask the Lawyer” is informational only; it should not be considered legal advice. Submitting a question to “Ask the Lawyer” does not create an attorney-client relationship between the person submitting the question and GWINN LEGAL PLLC. To view previous columns, please visit our website.

ASK THE LAWYER
By: Daniel A. Gwinn, Esq
.Attorney and Counselor at Law
GWINN LEGAL PLLC
901 Wilshire Drive, Suite 550
Troy, MI 48084
(248) 247-3300
(248) 247-3310 facsimile
daniel@gwinnlegal.com
www.gwinnlegal.com

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